As the old saying goes, nothing lasts forever, even in the channel. A new survey by networking vendor Enterasys finds one in four solution providers have fired a vendor in the last 12 months over the poor quality and availability of leads, intra-channel competition, and poor business goal alignment.
The number shouldn’t be a surprise to anyone, as churn is a constant in the channel. In reality, though, the number – and problem – is probably much worse as vendor firing isn’t the worse consequence of these issues.
The Enterasys study touches on the core points of contention between vendors and solution providers – business development and predictable outcomes. Forty-three percent of solution providers cite the lack of sales leads provided by vendors as the reason for leaving a channel program. One-third cited channel conflict or over-distributed channels that lead to too much competition for too few sales. And 31 percent cited poor support.
Probably the two most damning statistics from the survey is one in three solution providers saying they cannot define a return on investment from a vendor relationship, and 27 percent saying they’re vendors simply do not understand their business model and do not align their goals with partners.
The concerns cited by solution providers are valid and well-known in the channel. Solution providers do “fire” vendor partners on a regular basis. Conversely, vendors routinely fire or change channel criteria to weed out underperformers.
The real consequences of these problems, though, are probably much worse than the 25 percent attrition rate. Experience shows solution providers don’t so much leave vendor programs as de-emphasis participation in a channel program. They’ll keep a vendor on their line card for the occasional customer who demands a certain brand, but they won’t invest in certifications, channel development or sales activities.
In other words, solution providers will go fallow. And that presents a much bigger problem for vendors and the overall channel.
Consider this: Conventional wisdom says the channel operates on the 80/20 rule, in which 80 percent of channel revenue is driven through 20 percent of the partners. Invert the ratio; that means 20 percent of channel revenue is driven by 80 percent of partners who sell on a transactional or opportunistic basis. Many of those underperformers fall into the “de-emphasized” category.
For vendors, this is a huge problem and translates into huge costs. Even though partners aren’t selling at their full potential, they will demand services and support. They want leads, marketing materials, training and demonstration units. They require management, which means assigning underperformers to channel account managers and distribution. All of this costs money; and the 80 percent of the channel partners represent a huge operational expense without an ROI for the vendor.
Some vendors will look at these numbers and think it better if a partner fires them. If they’re dissatisfied and not performing, best they leave. But solution providers who stay in a channel program consuming resources without support actually punish vendors more by consuming expensive resources. It all adds up to unbalanced expectations on both sides of the equation that dampen total channel performance.